Multiple Failures Identified in Financial Services Sector’s Money Laundering Reporting Officer Appointments

Investigation Reveals Widespread Issues with MLRO Appointments

A recent investigation by the Malta Financial Services Authority (MFSA) has uncovered a series of failures in the appointment and performance of Money Laundering Reporting Officers (MLROs) across the financial services sector. The investigation, which covered 2021, 2022, and 2023, found numerous issues with MLRO appointments, including:

Lack of basic knowledge of money laundering and terrorist financing regulations
Insufficient experience in the role
Unawareness of business-specific risks and conflicts of interest

Autonomy Issues Persisted Throughout the Investigation Period

During the investigation period, the MFSA observed instances where MLROs did not have sufficient autonomy to perform their duties effectively. Specifically:

In 2021, two instances were noted where MLROs lacked autonomy
In 2022, three instances were observed with similar issues
In 2023, two instances persisted

Conflicts of Interest and Multiple Roles Identified

The investigation also found that many MLROs held multiple roles within their organisations, creating conflicts of interest. The frequency of these instances was:

In 2021: 9 instances identified
In 2022: 4 instances noted
In 2023: Only 1 instance observed

Knowledge Gaps and Training Shortfalls

The MFSA investigation also highlighted a lack of knowledge on internal governance, processes, and systems relevant to the MLRO function. Additionally, many MLROs lacked awareness of other financial crime typologies. The frequency of these issues was:

In 2021: 34 instances identified
In 2022: 13 instances noted
In 2023: Only 4 instances observed

The investigation also found that some MLROs failed to provide adequate training to staff, resulting in weak risk-awareness.

Call for Immediate Action and Review of MLRO Appointments

The MFSA has urged all licence holders to take immediate action to address these issues and ensure that their MLROs have the necessary knowledge, experience, and autonomy to perform their duties effectively. The authority has called on all licence holders to:

Review their MLRO appointments
Provide additional training to staff to mitigate risks

By taking swift action, the financial services sector can improve its governance and compliance, ultimately protecting against money laundering and terrorist financing threats.